“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
A five-year holding period can reveal more about an income stock than short-term price moves alone. For AT&T Inc (NYSE: T), the key question is not just whether the share price rose, but how much of the total return came from dividends and dividend reinvestment. That distinction matters because AT&T has long been evaluated as a dividend-paying telecom stock, where income can account for a large share of investor results.
Using a starting date of 06/04/2021 and an ending date of 06/03/2026, a $10,000 investment in AT&T would have produced a positive total return, assuming dividends were reinvested. The figures below show how that investment evolved over the period.
AT&T 5-Year Investment Result
| Start date: | 06/04/2021 |
|
|||
| End date: | 06/03/2026 | ||||
| Start price/share: | $22.11 | ||||
| End price/share: | $23.55 | ||||
| Starting shares: | 452.28 | ||||
| Ending shares: | 606.84 | ||||
| Dividends reinvested/share: | $5.90 | ||||
| Total return: | 42.91% | ||||
| Average annual return: | 7.40% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $14,289.64 | ||||
A $10,000 investment in AT&T stock on 06/04/2021 would have grown to $14,289.64 by 06/03/2026, based on the assumptions used here. That equates to a 42.91% total return, or an annualized return of 7.40%. These figures were computed using the Dividend Channel DRIP Returns Calculator.
What Drove the Return
The most important point in this five-year AT&T investment result is that the gain was not driven primarily by share-price appreciation. The stock rose from $22.11 to $23.55 over the period, a modest increase on its own. The stronger outcome came from the cumulative effect of cash dividends and the reinvestment of those dividends into additional shares.
That dynamic is especially relevant for telecom stocks and other mature, cash-generative businesses. When a company offers a meaningful dividend yield, total return can diverge materially from price return. In this case, the share count increased from 452.28 shares to 606.84 shares, showing how reinvestment contributed to compounding over time.
At a Glance
- Initial investment: $10,000
- Holding period: Five years
- Price change: $22.11 to $23.55 per share
- Total dividends reinvested per original share: $5.90
- Total return with reinvestment: 42.91%
- Average annual return: 7.40%
Why Dividend Reinvestment Matters
Dividend reinvestment can materially change long-term results, particularly when starting yields are elevated. Rather than taking distributions in cash, reinvestment uses each dividend payment to buy more shares. Those additional shares then generate future dividends, creating a compounding effect that becomes more visible over multi-year periods.
In AT&T’s case, that mechanism was central to the outcome shown above. Without reinvestment, the investment result would have depended more heavily on the stock’s relatively limited price appreciation. With reinvestment, the income stream itself became a source of incremental share accumulation and return.
The calculations above assume that dividends received over time were reinvested using the closing price on the ex-dividend date.
Current Yield and Yield on Cost
Based on the most recent annualized dividend rate of $1.11 per share, T has a current yield of approximately 4.71% using the ending share price of $23.55. For income-oriented analysis, another useful measure is yield on cost, which compares the current annual dividend to the original purchase price.
Using the original $22.11 entry price, the current annualized dividend of $1.11 represents a yield on cost of about 5.02%.
What Is Yield on Cost?
Yield on cost is the current annual dividend divided by the original purchase price per share. It answers a simple question: what cash yield is the investment now generating relative to the investor’s initial cost basis?
Formula:
Yield on cost = current annual dividend / original share price
For the figures used here:
$1.11 / $22.11 = 5.02%
How to Interpret AT&T’s Five-Year Return
This five-year return profile illustrates a broader principle in equity income investing: a stock does not need to deliver outsized capital appreciation to produce an acceptable overall result. If the underlying business continues to support regular distributions, and if those distributions are reinvested, a meaningful portion of shareholder return can come from income rather than price expansion.
That said, the composition of return also matters. A result led mainly by dividends may be more sensitive to future payout policy, cash-flow stability, and capital allocation decisions than one driven by sustained earnings growth and multiple expansion. For AT&T, that makes dividend durability and balance-sheet discipline central factors in evaluating future performance.
One practical takeaway is straightforward: when reviewing historical stock performance, total return is usually the more informative measure than price return alone. For dividend-paying stocks such as AT&T, ignoring reinvested income can materially understate what long-term shareholders actually earned.
Here’s one more investment quote before you go:
“We ignore outlooks and forecasts… we’re lousy at it and we admit it … everyone else is lousy too, but most people won’t admit it.” — Martin Whitman
